Small Manufacturer Strategic Decision Making Assistance Tool (SMSDM): a Case Study of a Small Oklahoma Manufacturer

Abstract

The propose was to design an informative analytical tool for small Oklahoma manufacturing firms that would assist in their strategic planning and decision making processes. The specific objectives were to: 1) determine the probability of a positive cash flow and profit for a small Oklahoma manufacturer under different product mixes and production practice scenarios; 2) analyze seasonal sales variability of a small Oklahoma manufacture and determine its effect on the manufacturer's monthly cash flow and profit given various product mixes; and 3) determine the importance of variability in prices of key inputs, primarily steel, on cash flow and profit. Data was obtained for a small Oklahoma manufacturer and the Bureau of Labor Statistics. The program Simetar was used to run cash flow simulations and project cash flow probabilities for a case study. An informative analytical tool for small Oklahoma manufacturers was successfully created and used to run six simulations. Cash flow projections for the case study show that the firm has a cash flow problem during summer months of the year. The negative cash flow for the summer months was found to be most directly related to variability in product sales. Steel price variability did affect cash flows negatively during the summer months also but was less of a factor than sales variability. The firm had the highest projected annual cash flows when producing one newly designed product and two of the standard products while manufacturing when products are ordered.